Electricity is by its nature difficult to store and has to be available on demand. Consequently, unlike other products, it is not possible, under normal operating conditions, to keep it in stock, ration it or have customers queue for it. Furthermore, demand and supply vary continuously. There is therefore a physical requirement for a controlling agency, the independent system operator (ISO), to coordinate the dispatch of generating units to meet the expected demand of the system across the transmission grid. If there is a mismatch between supply and demand, the generators speed up or slow down causing the system frequency (either 50 or 60 hertz) to increase or decrease. If the frequency falls outside a predetermined range the system operator will act to add or remove either generation or load. In addition, the laws of physics determine how electricity flows through an electricity network. Hence the extent of energy lost in transmission and the level of congestion on any particular branch of the network will influence the economic dispatch of the generation units (e.g., electric generators).
Thus, in economic terms, electricity (both power and energy) is a commodity capable of being bought, sold and traded. An electricity market is a system for effecting purchases, through bids to buy; sales, through offers to sell; and short-term trades, generally in the form of financial or obligation swaps. Bids and offers use supply and demand principles to set the price. Long-term trades are contracts similar to power purchase agreements and are generally considered private bi-lateral transactions between counterparties. Most electricity markets, and many other markets, function in accordance with a bid-based, security constrained, economic dispatch model.
Wholesale transactions (e.g., bids and offers) in electricity are typically cleared and settled by the market operator or a special-purpose independent entity charged exclusively with that function (e.g., ISOs). Market operators do not clear trades but often require knowledge of the trade in order to maintain generation and load balance. The commodities within an electric market generally include two types: power and energy. Power is the metered net electrical transfer rate at any given moment and is measured in megawatts (MW). Energy is electricity that flows through a metered point for a given period and is measured in megawatt hours (MWh).
Markets for energy-related commodities trade net generation output for a number of intervals usually in increments of 5, 15 and 60 minutes. Markets for power-related commodities required and managed by (and paid for by) market operators to ensure reliability, are considered ancillary services and include such names as spinning reserve, non-spinning reserve, operating reserves, responsive reserve, regulation up, regulation down, and installed capacity.
In addition, for most major operators, there are markets for transmission congestion and electricity derivatives such as electricity futures and options, which are actively traded. These markets developed as a result of the restructuring of electric power systems around the world.
The scope of each electricity market includes the transmission grid or network that is available to the wholesalers, retailers and the ultimate consumers in any given geographic area. Markets may extend beyond national boundaries.
In order to insure consistent and reliable delivery of electricity to businesses, hospitals, homes, etc., electricity markets are structured to efficiently and timely effect transactions. For an economically efficient electricity market to be successful it is helpful that a number of criteria are met, namely the existence of a coordinated spot market that has bid-based, security-constrained, economic dispatch. The system price in the day-ahead market is, in principle, determined by matching offers from generators (e.g., market stakeholders) to bids from consumers at each node to develop a classic supply and demand equilibrium price, usually on an hourly interval, and is calculated separately for sub-regions in which the system operator's load flow model indicates that constraints will bind transmission imports.
Market participants or stakeholders in the market typically rely upon publically available published historical information from the ISOs and the stakeholder's own private information to determine costs and appropriate unit commitments and pricing in the form of offers. However, the information from the ISO is limited to past market data and schedules optimized for the overall market welfare and not for the specific stakeholder. Therefore, what is needed are systems, methods and apparatus for a stakeholder market simulator for energy delivery systems.